Capital gains on sale of bank-held immovable property were not attributable to banking business, though computation was corrected.

Capital gains from sale of immovable property acquired by a co-operative bank in satisfaction of a debt were held not to be profits attributable to banking business for purposes of section 80P(2)(a)(i). The expression "attributable to" is wider than "derived from", but it does not extend to sale proceeds of a permanent capital asset that had been treated as a capital asset and on which depreciation was claimed; such property was not a readily realisable banking security. The exemption claim therefore failed. The computation of capital gain, however, was found to be incorrect in the lower authorities, and the correct capital gain was accepted at Rs. 75,900.

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Issues: Whether capital gains arising from sale of immovable property acquired by a co-operative bank in satisfaction of a debt were exempt as profits attributable to banking business under section 80P(2)(a)(i), and whether the amount of capital gains was correctly computed.

Analysis: The expression "attributable to" is wider than "derived from", but it is not unlimited. Banking under section 5(b) of the Banking Regulation Act, 1949 refers to money-lending, while section 6 only permits additional activities. Immovable property acquired and retained as a permanent asset, on which depreciation was claimed and which was treated as a capital asset, was not a readily realisable security and its sale proceeds could not be treated as profits of banking business. The capital gain therefore did not qualify for exemption under section 80P(2)(a)(i). However, the computation adopted by the lower authorities was incorrect and the correct figure of capital gain was accepted at Rs. 75,900.

Conclusion: The claim to exemption failed, but the capital gain was reduced to Rs. 75,900.

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